The ITO,, Visakhapatnam v. Shri NNV Subba Rao,, Visakhapatnam

ITA 343/VIZ/2017 | 2014-2015
Pronouncement Date: 22-11-2017 | Result: Allowed

Appeal Details

RSA Number 34325314 RSA 2017
Assessee PAN AIXPS6389R
Bench Visakhapatnam
Appeal Number ITA 343/VIZ/2017
Duration Of Justice 5 month(s) 12 day(s)
Appellant The ITO,, Visakhapatnam
Respondent Shri NNV Subba Rao,, Visakhapatnam
Appeal Type Income Tax Appeal
Pronouncement Date 22-11-2017
Appeal Filed By Department
Tags No record found
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 22-11-2017
Assessment Year 2014-2015
Appeal Filed On 09-06-2017
Judgment Text
ITA NO.343/VIZAG/2017 SHRI N.N.V. SUBBA RAO VISAKHAPATNAM 1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM . . . ' % BEFORE SHRI V. DURGA RAO JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH ACCOUNTANT MEMBER ./I.T.A.NO.343/VIZAG/2017 ( / ASSESSMENT YEAR: 2014-15) ITO WARD - 3(3) VISAKHAPATNAM SHRI N.N.V. SUBBA RAO VISAKHAPATNAM [PAN NO. AIXPS6389R ] ( ' / APPELLANT) ( ()' / RESPONDENT) C.O. 72/VIZAG/2017 (ARISING OUT OF I.T.A.NO.343/VIZAG/2017) ( / ASSESSMENT YEAR: 2014-15) SHRI N.N.V. SUBBA RAO VISAKHAPATNAM ITO WARD - 3(3) VISAKHAPATNAM ( ' / APPELLANT) ( ()' / RESPONDENT) / APPELLANT BY : SHRI M.K. SETHI DR / RESPONDENT BY : SHRI V.K. VISWESWARA RAO AR / DATE OF HEARING : 13.11.2017 / DATE OF PRONOUNCEMENT : 22.11.2017 ITA NO.343/VIZAG/2017 SHRI N.N.V. SUBBA RAO VISAKHAPATNAM 2 / O R D E R PER D.S. SUNDER SINGH ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1 {CIT(A)} VI SAKHAPATNAM VIDE ITA NO.69/2016-17/ITO WD-3(3) VSP/2016-17 DATED 15. 3.2017 FOR THE ASSESSMENT YEAR 2014-15. THERE WAS A DELAY OF 18 DAYS IN FILING THE CROSS OB JECTIONS ON APPEAL BY THE ASSESSE AND HAS FILED AN AFFIDAVIT FO R CONDONATION OF DELAY CITING HEALTH REASONS. WE HAVE HEARD BOTH THE PARTI ES AND AFTER CONSIDERING THE REASONS FOR DELAY THE DELAY IS CON DONED AND CROSS OBJECTIONS ARE ADMITTED. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FLIE D HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2014-15 ON 14.10.201 5 DECLARING TOTAL INCOME OF RS.1 78 310/- WHICH INCLUDE THE INC OME FROM HOUSE PROPERTY AND OTHER SOURCES. THE ASSESSING OFFICER ( A.O.) ON VERIFICATION OF IMPOUNDED MATERIAL FOUND DURING THE COURSE OF SURVEY CONDUCTED IN THE BUSINESS PREMISES OF SHRI D ADI SRI RAMA KRISHNA MD OF M/S. GAJUWAKA CONSTRUCTIONS PVT. LTD . THAT THE ASSESSEE HAD SOLD THE PROPERTY FOR A SALE CONSIDERA TION OF RS.1.50 CRORES AND RECEIVED AN AMOUNT OF RS.95.00 LACS OVER AND ABOVE THE ITA NO.343/VIZAG/2017 SHRI N.N.V. SUBBA RAO VISAKHAPATNAM 3 SALE CONSIDERATION AS PER THE MEMORANDUM OF UNDERST ANDING ENTERED INTO BY SHRI R. ANIL KUMAR HUSBAND OF SMT. A. ANURADHA AND THE PURCHASER OF THE PROPERTY M/S. GAJUWAKA CON STRUCTIONS REPRESENTED BY ITS MANAGING DIRECTOR SHRI DADI SHR I RAMA KRISHNA DATED 31.07.2013. THE A.O. ALSO NOTED THAT THE ASSE SSEE HAD ENTERED IN TO SALE AGREEMENT ON 31.01.2013 WITH SMT . ALLIKA ANURADHA W/O RANI ANIL KUMAR TO SELL THE IMPUGNED PROPERTY FOR A CONSIDERATION OF RS.2.45 CRORES AND RECEIVED THE AD VANCE OF RS.10.00 LACS ON 23/11/2012 AND RS.5.00 LACS ON16/0 1/2012 BUT ADMITTED THE LONG TERM CAPITAL GAINS TAX ON SALE DE ED AMOUNT OF RS.1.50 CRORES. IN VIEW OF THE ABOVE FACTS THE A. O. RE-OPENED THE ASSESSMENT BY ISSUANCE OF NOTICE U/S.148 DATED 12.1 .2016 AND TAKEN UP THE CASE FOR REASSESSMENT. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS THE ASSESSEE SUBMITTED THAT THE AGREEMENT WITH SMT. ALLIKA ANURADHA W/O RANI ANIL KUMAR COUL D NOT BE MATERIALIZED HENCE THE PROPERTY WAS SOLD FOR RS.1. 50 CRORES AS PER THE SALE DEED DATED 31.7.2013 AND HE WAS NOT AWARE OF THE AGREEMENT BETWEEN THE SHRI ANIL KUMAR AND THE PURCH ASER. THE ASSESSEE FURTHER SUBMITTED THAT HE HAS OFFERED THE SALE CONSIDERATION CORRECTLY AND THERE WAS NO UNDERSTATE MENT OF INCOME. THE A.O. DID NOT ACCEPT THE SUBMISSIONS MAD E BY THE ITA NO.343/VIZAG/2017 SHRI N.N.V. SUBBA RAO VISAKHAPATNAM 4 ASSESSE AND NOTED THAT THE COMBINED READING OF SAL E AGREEMENT DATED 31.1.2013 BETWEEN THE ASSESSEE AND SMT. ALLIKA ANU RADHA W/O RANI ANIL KUMAR THE MOU OF SHRI R. ANIL KUMAR (HUS BAND OF A. ANURADHA) WITH THE PURCHASER OF THE PROPERTY M/S. G AJUWAKA CONSTRUCTIONS DATED 31.07.2013 AND THE STATEMENT RE CORDED FROM SHRI RANI ANIL KUMAR THE ACTUAL CONSIDERATION WAS R S.2.45 CRORES BUT NOT RS.1.50 CRORES ACCORDINGLY ASSESSED THE CAP ITAL GAINS. 2.1 THE AO ALSO NOTED THAT THE ASSESSEE CLAIMED THE COST OF CONSTRUCTION AND IMPROVEMENT BUT AS PER THE SALE DE ED THE PROPERTY SOLD WAS A VACANT SITE. THE AO CALLED UPON THE ASSESSEE TO EXPLAIN THE SAME. THE ASSESSEE SUBMITTE D BEFORE THE AO THAT THE BUILDING WAS IN EXISTENCE AS ON THE DATE OF REGISTRATION BUT THE SAME WAS NOT MENTIONED IN THE SALE DEED BY THE OVERSIGHT. THE AO REJECTED THE ASSESSEE'S AR GUMENTS AND COMPUTED THE LONG TERM CAPITAL GAIN BY DISALLOW ING THE ASSESSEE'S CLAIM FOR COST OF CONSTRUCTION AND IMPRO VEMENTS OF THE BUILDING. ACCORDINGLY THE AO DETERMINED THE LO NG TERM CAPITAL GAINS AS UNDER: ITA NO.343/VIZAG/2017 SHRI N.N.V. SUBBA RAO VISAKHAPATNAM 5 TOTAL SALE CONSIDERATION RECEIVED AS ON 31.1.2013 RS.2 45 00 000 LESS: COST OF ACQUISITION: COST OF LAND PURCHASED 500 SQ.YDS X RS.400/- PER SQ. YD = RS.2 00 000 INDEXED COST OF ACQUISITION = (2 00 000 X 939)/100 RS. 18 78 000 TAXABLE LONG TERM CAPITAL GAIN RS.2 26 22 000 3. AGGRIEVED BY THE ORDER OF THE A.O. THE ASSESSE E WENT ON APPEAL BEFORE THE CIT(A) AND THE LD. CIT(A) RELIED ON THE AGREEMENT ENTERED IN TO BY THE ASSESSEE WITH SMT. ALLIKA ANURADHA W/ O SRI RANI ANIL KUMAR DATED 31.01.2013 MOU OF SHRI R. ANIL KUMAR (HUSBAND OF SMT. A. ANURADHA) WITH THE PURCHASER OF THE PROPERT Y M/S GAJUWAKA CONSTRUCTIONS DATED 31.07.2013 AND THE STA TEMENT RECORDED FROM SHRI RANI ANIL KUMAR ON 01/09/2015 AN D CONFIRMED THE CONSIDERATION OF THE PROPERTY AT ` 2.45 CRORES 3.1 WITH REGARD TO THE COST OF CONSTRUCTION AND IND EXATION OF COST OF CONSTRUCTION THE LD. CIT(A) PLACED RELIANCE ON THE MOU DATED 31/07/2013 AND THE LETTERS ADDRESSED BY THE STATE BANK OF HYDERABAD DATED 20/08/2013 OBJECTING FOR DEMOLITION OF THE BU ILDING SINCE IT WAS MORTGAGED TO THE BANK THE PROPERTY TAX ASSESSMENT S BUILDING PLAN APPROVAL AND OBSERVED THAT THE CONSIDERATION OF ` 2.45 CRORES WAS PASSED ON FOR THE SALE OF SITE TO THE EXTENT OF 50 0 SQ.YDS. ALONG WITH GROUND FLOOR FIRST FLOOR WITH PLINTH AREA OF 3200 SQ.FT. EACH AND SECOND ITA NO.343/VIZAG/2017 SHRI N.N.V. SUBBA RAO VISAKHAPATNAM 6 FLOOR OF 2700 SQ.FT IN DR.NO.31-31-21 AND DIRECTED THE A.O. TO ALLOW THE BENEFIT OF INDEXATION OF COST OF CONSTRUCTION. HOWEVER WITH REGARD TO THE VALUATION OF THE PROPERTY FOR INDEXATION TH E CIT(A) DIRECTED THE A.O. TO OBTAIN VALUERS REPORT OF THE BANK OR OTHER RELIABLE INFORMATION SINCE THERE ARE NO DETAILS AND ACCORDINGLY REMITTED THE MATTER BACK TO THE FILE OF THE AO TO DETERMINE THE COST OF CONSTRU CTION. AGGRIEVED BY THE ORDER OF THE LD.CIT(A) THE DEPARTMENT HAS FILED APPEAL TO TRIBUNAL CHALLENGING THE ORDER OF THE CIT(A) WITH REGARD TO ALLOWING THE COST OF CONSTRUCTION OF THE BUILDING AND THE ASSESSEE FILED CROSS OBJECTIONS CHALLENGING THE ORDER OF THE LD.CIT(A) FOR DETERMIN ING THE SALE CONSIDERATION AT ` 2.45 CRORES AND SUPPORTING THE ORDER OF THE LD.CIT(A) TO ALLOW THE COST OF CONSTRUCTION. 4. APPEARING FOR THE REVENUE THE LD. D.R. ARGUED THAT AS PER RECITALS OF THE REGISTERED SALE DEED DATED 31.7.2013 THE AS SESSEE HAS DEMOLISHED THE BUILDING PRIOR TO THE SALE OF THE PR OPERTY AND THERE WAS NO BUILDING AS SUCH AT THE TIME OF TRANSFER OF THE PROPERTY. THE ASSESSEE HAS HANDED OVER VACANT SITE ADMEASURING 5 00 SQ.YDS. TO THE VENDEE AS PER REGISTERED SALE DEED AND ASSESSEE HAS NOT FURNISHED ANY EVIDENCE WITH REGARD TO THE EXISTENCE OF THE BUILDI NG AT THE TIME OF THE SALE THUS THERE IS NO CASE FOR ALLOWING THE BENEFI T OF INDEXATION WITH REGARD TO THE COST OF CONSTRUCTION OF THE BUILDING AND ARGUED THAT THE ITA NO.343/VIZAG/2017 SHRI N.N.V. SUBBA RAO VISAKHAPATNAM 7 LD. CIT(A) HAS COMMITTED AN ERROR IN DIRECTING THE A.O. TO ALLOW THE COST OF CONSTRUCTION. THE LD.DR FURTHER SUBMITTED THAT T HERE IS NO ERROR IN THE ORDER OF THE A.O. HENCE REQUESTED TO SET ASIDE THE ORDER OF THE LD.CIT(A) AND RESTORE THE ASSESSMENT ORDER. 5. ON THE OTHER HAND THE LD. A.R. ARGUED THAT THE ASSESSEE HAD CONSTRUCTED THE BUILDING IN THE SITE CONSISTING OF GROUND AND FIRST WITH 3200 SQ.FT. EACH AND THE SECOND FLOOR WITH 2700 SQ. FT. THE MOU DATED 31.7.2013 THE LETTERS OF STATE BANK OF HYDERABAD W ITH REGARD TO THE LOAN AND PROPERTY TAX ASSESSMENTS ESTABLISH THE EXI STENCE OF THE BUILDING AND THE STATE BANK OF HYDERABAD HAS OBJECT ED FOR DEMOLISHING THE BUILDING OR DIRECTED THE ASSESSEE TO STOP THE D EMOLITION AS THE IMPUGNED PROPERTY WAS MORTGAGED. SINCE THERE WAS A N EXISTENCE OF BUILDING WHICH WAS SUPPORTED BY THE LOAN TAKEN BY THE ASSESSE MORTGAGING THE BUILDING THE LD. A.R. ARGUED THAT T HERE IS NO ERROR IN THE ORDER OF THE CIT(A) AND NO INTERFERENCE IS CALLED F OR. WITH REGARD TO THE CROSS OBJECTIONS THE LD. A.R. ARGUED THAT IT IS A FACT THAT THE ASSESSEE HAS ENTERED INTO AN AGREEMENT FOR THE SALE OF PROPE RTY FOR AN AMOUNT OF ` 2.45 CRORES WITH ALLIKA ANURADHA AND RECEIVED ADVA NCE OF ` 15 LAKHS. HOWEVER THE AGREEMENT DID NOT MATERIALIZE HENCE T HE ASSESSEE HAS SOLD THE PROPERTY TO M/S. GAJUWAKA CONSTRUCTIONS FO R A CONSIDERATION OF ` 1.5 CRORES BY SALE DEED DATED 31.07.2013. THE LD.A .R FURTHER STATED ITA NO.343/VIZAG/2017 SHRI N.N.V. SUBBA RAO VISAKHAPATNAM 8 THAT THE ASSESSEE HAS NOT RECEIVED ANY EXCESS AMOUN T FOR SALE OF THE PLOT AND HE WAS NOT AWARE OF THE MOU REACHED BETWEE N HUSBAND OF SMT. ANURADHA AND MR. D.SREE RAMA KRISHNA M.D. OF M/S. GAJUWAKA CONSTRUCTIONS AND NO WAY RESPONSIBLE FOR THE SAID T ERMS AND CONDITIONS OF THE MOU. THUS THE LD.AR ARGUED THAT HE HAS ADMIT TED THE SALE CONSIDERATION CORRECTLY AND CLAIMED THE CORRECT COS T OF CONSTRUCTION HENCE REQUESTED TO SET ASIDE THE ORDERS OF THE LOWE R AUTHORITIES AND DIRECT THE AO TO ACCEPT THE INCOME RETURNED. 6. IN THE REJOINDER THE LD. D.R. SUBMITTED THAT THE SALE AGREEMENT ENTERED WITH SMT. ALLIKA ANURADHA THE STATEMENTS R ECORDED FROM SRI R. ANIL KUMAR ON 1.9.2015 AND THE MOU DATED 31.3.2013 ESTABLISH THAT THE SALE CONSIDERATION WAS AT ` 2.45 CRORES AND THE SAME REQUIRED TO BE UPHELD. 7. WE HAVE HEARD BOTH THE PARTIES PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. IN THIS CASE THE ASSESSEE HAS SOLD A PROPERTY SITUATED AT ALLIPURAM WARD DABAGARDENS AREA SAI BABA STREET DOOR NO.31-31-52 WITH SURVEY NO.1452/1/A TO THE EXTENT OF 500 SQ.YDS. VACANT SIT E FOR CONSIDERATION OF ` 1.5 CRORES AND THE SAME WAS REGISTERED WITH SUB RE GISTRAR OFFICE VISAKHAPATNAM. A SURVEY U/S 133A OF THE ACT WAS CO NDUCTED IN THE CASE OF M/S. GAJUWAKA CONSTRUCTIONS ON 26.8.2015 AN D DURING THE ITA NO.343/VIZAG/2017 SHRI N.N.V. SUBBA RAO VISAKHAPATNAM 9 COURSE OF SURVEY A SALE DEED FOR A CONSIDERATION O F ` 1.5 CRORES AND A MEMORANDUM OF UNDERSTANDING FOR RECEIPT OF ` 95 LAKHS DATED 31.07.2013 WAS FOUND AND IMPOUNDED BY THE AO. ON T HE BASIS OF THE MOU REACHED BY SHRI R.ANIL KUMAR AND THE PURCHASER DATED 31.07.2013 AND THE STATEMENT RECORDED FROM SHRI R.ANIL KUMAR O N 01/09/2015 HELD THAT THE SALE CONSIDERATION WAS ` 2.45 CRORES. THERE WAS NO FINDING OR EVIDENCE COLLECTED BY THE A.O. WITH REGARD TO THE R ECEIPT OF SUM OF ` 2.45 CRORES EXCEPT THE MOU THE SALE AGREEMENT WITH SMT. ANURADHA AND THE STATEMENT OF SHRI ANIL KUMAR AND D. SHRIRAM A MURTHY. THE AO HAS BELIEVED THE MOU DATED 31/07/2013 AND THE AGREE MENT FOR TAXING THE SALE CONSIDERATION OF ` 2.45 CRORES BUT DID NOT CONSIDER THE RECITALS FOR COST OF CONSTRUCTION OF THE BUILDING THOUGH IT WAS MENTIONED IN THE MOU. SIMILARLY THOUGH THE ASSESSE RELIED ON THE MOU AND THE SALE AGREEMENT FOR EXISTENCE OF THE BUILDING BUT DID NOT ACCEPT THE SALE CONSIDERATION MENTIONED THEREIN. THEREFORE SUBMISSI ONS OF BOTH THE DEPARTMENT AND THE ASSESSE HAVE MADE THE CONTRADICT ING CLAIMS FOR SALE CONSIDERATION AS WELL AS THE COST OF CONSTRUCTION. IT IS SEEN FROM THE APPEAL ORDER THAT BOTH SHRI ANIL KUMAR AND THE PURC HASER HAVE AGREED THAT THE EXCESS AMOUNT OVER AND ABOVE THE SALE DEED TO THE EXTENT OF RS.95.00 LACS WAS PASSED ON THE TO THE ASSESSE. BOT H MR.ANIL KUMAR AND SHRI D.SRI RAMA KRISHNA REFERRED THE PENDING DISPUT E IN THE COURT WHICH ITA NO.343/VIZAG/2017 SHRI N.N.V. SUBBA RAO VISAKHAPATNAM 10 WAS NOT DISPUTED BY THE ASSESSE DURING THE APPEAL H EARING. THE DETAILS OF PENDING SUIT WAS NOT FURNISHED BEFORE THE LD.AO AND THE LD.CIT(A). THE LD.AR DURING THE APPEAL HEARING ALSO DID NOT FU RNISH THE PENDING COURT LITIGATION. FURTHER THE LD.A.R SUBMITTED THAT THE ASSESSE HAD RECEIVED THE ADVANCE OF RS.38.00 LACS FROM SHRI A.A NURADHA AND ANIL KUMAR WHICH WAS RETURNED OUT OF THE SALE CONSIDERAT ION BUT NO EVIDENCE WAS FURNISHED. THE SALE DEED RECITALS SHOW THAT THE BUILDING WAS DEMOLISHED AND VACANT PLOT WAS HANDED OVER. WHEREAS THE MOU SHOWS THE EXISTENCE OF SUPER STRUCTURE. THE ASSESSE CLAIM S THE SALE OF VACANT SITE AFTER DEMOLITION OF THE BUILDING STATE BANK O F HYDERABAD LETTERS REFERRED IN THE APPELLATE ORDER EVIDENCES THE EXIST ENCE OF THE BUILDING AND THE PROCESS OF DEMOLITION. FROM THE ABOVE IT IS CLEAR THAT NEITHER THE ASSESSE NOR THE AO HAS COLLECTED NOR THE ASSESSEE H AS FURNISHED THE COMPLETE FACTS. IT APPEAR THAT THE SALE TRANASACTIO N IS INTERLINKED WITH SMT. ANURADAHA SHRI ANIL KUMAR THE PURCHASER AND THE ASSESSE. FURTHER EXAMINATION OF THE CONTENTS OF THE SUIT REF ERRED BY SHRI ANIL KUMAR AND D. SRI RAMA KRISHNA ARE ALSO APPEAR TO BE CRUCIAL FOR ARRIVING AT THE CORRECT FACTUAL POSITION. THEREFORE WE ARE O F THE CONSIDERED OPINION THAT THE CASE REQUIRED TO BE REMITTED BACK TO THE FILE OF THE AO TO VERIFY THE ENTIRE FACTS AND TO DECIDE BOTH THE I SSUES OF SALE CONSIDERATION AND THE COST OF CONSTRUCTION ON MERIT S. BOTH THE LD.AR AND ITA NO.343/VIZAG/2017 SHRI N.N.V. SUBBA RAO VISAKHAPATNAM 11 THE DR HAVE AGREED FOR REMITTING THE MATTER BACK TO THE FILE OF THE AO. ACCORDINGLY WE SET ASIDE THE ORDERS OF THE LOWER A UTHORITIES AND REMIT THE MATTER BACK TO THE FILE OF THE AO FOR DE-NOVO C ONSIDERATION. 8. IN THE RESULT THE APPEAL FILED BY THE REVENUE A ND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE ALLOWED FOR STA TISTICAL PURPOSES. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 22 ND NOV17. SD/- SD/- ( . ) ( . . ' ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 22.11.2017 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ITO WARD-3(3) VISAKHAPATNA M 2. / THE RESPONDENT SHRI N.N.V. SUBBA RAO C/O DR. N.V.S. MOHAN 401 RAJA LAKSHMI RESIDENCY EAST POINT COLONY VISAKHAP ATNAM-530017. 3. + / THE PRINCIPAL CIT-1 VISAKHAPATNAM 4. + ( ) / THE CIT (A)-1 VISAKHAPATNAM 5. # . . # / DR ITAT VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT VISAKHAPATNAM